Blockchain to house programmatic media buying 'in 2019'

IBM is spearheading the ad ecosystem's transition to blockchain to solve industry-wide transparency issues, but countless tech-heads are engaged in a space race to be the first -- with some saying that scalability will win.

There’s a new title up for grabs in the adtech world: Blockchain commander-in-chief.

Technology firms are scrambling to become the first to successfully roll out a decentralized platform to house programmatic media buying and eliminate the transparency issues that have long plagued this arm of advertising.

It’s a feat experts are confident they can reach by 2019.

"Blockchain’s not this new, hot trendy thing -- it’s groundbreaking technology and we have a unique view into how it might be used," said Babs Rangaiah, executive partner of global marketing at IBM iX.

No doubt about it. Rangaiah’s department has been the driving force in persuading some of the biggest brands to move their ad ecosystem over to blockchain (a decentralized digital ledger in which transactions are recorded chronologically and publicly via numerous nodes, the trust of which is valued because its authenticity is verified by every member of the chain, meaning no third-party engagement).

But don’t let the onslaught of press coverage fool you into thinking that IBM is the only firm in this space. The tech giant may be leading the charge, but a slew of other companies and startups have already rushed into the space. And one will emerge victorious in the coming months.

Rangaiah was an early adopter of blockchain. He spent 14 years as a global marketer at Unilever, and when he moved to IBM, he used his connections to pull his former colleagues into a pilot program, which launched over the winter.

The executive partner convinced his alum to get onboard by framing blockchain as the answer to the programmatic discrepancy issues he faced almost every day at Unilever. And it worked. Unilever is IBM’s anchor blockchain client, and the industry’s brand pioneer for blockchain.

Together, they spearheaded a very small and self-contained minimum viable product at the end of last year. The goal was to significantly step up how to solve media buying discrepancies. It was a success. Such a success, that Unilever didn’t wait until the campaign finished to move on to the next step, said Rangaiah.

They wanted to scale. So in the months that followed, IBM searched for a partner to strengthen its data. Enter Mediaocean. The workflow software company is already integrated into the ecosystem and offers enough particulars about advertisers to amp up IBM’s pilot into a large-scale network.

"Between all of their products, Mediaocean is at the center of media buying in the U.S. and some other markets as well including the U.K.," explained Rangaiah. "In the U.S. they have products that handle things like purchase orders, invoicing, media planning, executing -- so their whole operation is being built on our blockchain."

Members of the supply chain which are currently hidden from marketers will be given a code of sorts that get them to be seen through the blockchain and the dashboard IBM is building for clients. It means that, for the first time, marketers will be able to clearly see who’s getting paid and how much, and who the publishers are.

The system fixes three things: Transparency, reconciliation and efficiencies in the supply chain.

"Once you have this kind of transparency, you can start making decisions you couldn’t make before," he said. "Those decisions could be who should get paid less, where we can move that money and reinvest the cash you’re losing on discrepancy."

IBM’s project has since expanded to eight companies including Kellogg, Kimberly-Clark, Pfizer and other undisclosed brands. All will conduct media buys through the blockchain system with multiple publishers in Q4. That’s crunch time. If January 2019 yields the results Rangaiah and his team hope to see, they will try to expand the platform use again to the top 25 advertisers "and really see if we can make it an industry solution for early next year."

Rangaiah estimates setting the terms and conditions for an adland-wide adoption will take IBM through until the end of 2019, assuming everything goes perfectly.

"We’ve already got so many of the biggest advertisers, if we can prove with this pilot that this is a valuable approach and a great improvement upon the current approach, then I would imagine that it will fall like dominoes quickly next year," he said. "I think everyone will want to be a part of it -- they’d be silly not to."

Does blockchain make in-housing easier?

But Rangaiah stressed that the technology isn’t a solution just to bring media buying to brands, and the industry’s primary focus is solving transparency. He said: "[Media agencies] are integrated into the system like all other participants. The first step of the pilot is to provide transparency of the entire supply chain. Based on that, brands can make decisions with accurate information. That said, agencies are a key partner to most brands and play a critical role in planning and buying media. This initiative won't change that.

"If a brand were so inclined, this initiative would certainly make [in-housing] easier, however, there are many functions an agency plays that go above and beyond what straight technology can do."

Agencies aren’t shaking in their boots, he said, because they’re right at the center of buying and placing ads -- and that won’t change. Although, he does admit agencies have been sluggish on the blockchain uptake.

Rumors of a correlation between blockchain and in-housing are also quashed by Rangaiah’s friendly rival, Daniel Gouldman, co-founder of blockchain company Ternio.

"I don’t think it disseminates an agency," he explained. "I think it makes an agency accountable. Adtech has really let down agencies. It’s not the agency’s fault that the adtech ecosystem sucks.

"Blockchain isn’t going to give an advantage to brands to bring stuff in-house, because you’re still going to require savvy clients. If anything, there’s an advantage to the agencies to use blockchain," said Gouldman.

By and large, he added, clients are focused on producing their projects, not hiring a team of people with a deep understanding of programmatic. It’s easy for brands to take on a bunch of kids straight out of college to handle all Facebook and Google ad buying, but reach outside that walled garden and into the larger ecosystem requires a more mature knowledge, he said.

Could brands learn blockchain skill sets from the likes of IBM with the sole purpose of taking it in-house? Yes. But Gouldman’s argument is that it’s still far more simple and a hell of a lot easier to have a media agency handle media buying in all forms.

Scalability will win blockchain

The fiercely passionate co-founder is one of those players engaged in the blockchain space race with IBM and countless other firms looking to capitalize on the technology -- and he’s convinced he’ll win. He’s already in talks with two massive names in the ad ecosystem, but declined to reveal them.

Gouldman’s not-so-secret weapon is scalability.

IBM may have hauled in some of the heaviest hitters in advertising for its pilot program and is sitting on a ton of data from Mediaocean, but its permissioned blockchain platform (known as Hyperledger Fabric) caps out at 3,500 transactions per second, researchers said earlier this year. Meanwhile, Ternio’s framework (called Lexicon) can process more than one million transactions per second.

Gouldman said his team has created the world’s fastest blockchain. In fact, he ordered a "costly" third-party audit of the tech back in May just so he could claim this boasting right.

The audit, conducted by security firm Null Bash, concluded that Ternio’s "schematics and architecture are unique and resolve the issues that are presently limiting most decentralized blockchain architectures from scaling in a way that could be useful in any number of use cases from financial transactions to digital advertising to messaging applications."

Gouldman stressed that whoever cracks scalability first is going to win the business: "It doesn’t matter how many deals you close, you’re still maxed out at ‘X’ transactions per second. As much as you might want to work with that company, you won’t be able to, because they can’t handle your needs -- and we can."

Like Rangaiah, Gouldman believes the programmatic ecosystem will live on blockchain by the end of 2019.

He continued: "If, in fact, blockchain can deliver an ROI -- if it’s actually saving money, which hasn’t been proven yet -- as soon as you get a legitimate study from an Accenture, every single major brand advertiser which cares about it is going to rapidly avalanche into this and force adoption through their agencies. It’s going to be top-down. But it’s incumbent upon the blockchain companies like Ternio proving it works."

He said the industry is going to see a rapid adoption in 2019, which will mark the end of adtech letting brands down for years. "And then it will all be over," said Gouldman. "We’re going to have a truly transparent marketplace, like we should."

Competition is the catalyst moving blockchain media buying closer to the finish line. And Gouldman pegs himself as one hell of a competitor. The only thing that separates Ternio from IBM is that "IBM has a great sales team," he jokes, before adding seriously: "We’re much, much, much further ahead in creating a faster blockchain than they are."

Once a provable blockchain system is market ready, the technology will be bought and distributed -- people won’t waste their time building what has been built, said Gouldman. Game over (until someone figures out how blockchain can process media buying at 20 million transactions per second, at least).

Agencies poised for ‘client-driven’ programmatic transition

Bill Bruno, CEO of independent global marketing and media consultancy Ebiquity, has fielded countless blockchain questions from clients, including a handful of automotive brands. Some store chains he advises are already using it for production and distribution.

"Every client in past three to four months that has gone through a pitch has asked about including blockchain in the brief they send out to their agencies," Bruno explained. "It’s all educational at this point."

The first couple of questions, he said, is always: "What is it?" and "Has anyone done it?" The next theme is how it would be implemented into the digital ecosystem. "A lot of times, that conversation comes up when advertisers are thinking about in-housing some of the services around programmatic," Bruno said.

He added: "There are so many conversations happening right now with our clients around what to do about programmatic, how to build better and more mutually beneficial partnerships with media agencies, and how they can create more transparency in that ecosystem."

Ed McElvain, global head of ad tech and operations at Mediahub, describes blockchain’s ability to create a transparent adtech ecosystem as "the lowest-hanging-fruit opportunity."

He added: "We expect this use-case for blockchain to develop first and fastest as it will have client-driven initiative and money behind it."

This isn't a science experiment

Solving the transparency issue is one of the top items on Kimberly-Clark’s agenda. The brand is part of IBM’s pilot blockchain program.

Josh Herman, global director of digital marketing capabilities and innovation, acknowledged that it might not seem intuitive for a 146-year-old company to be pushing the envelope in the technology arm of marketing and media.

"But that is actually part of the why we are engaged in this consortium, because in order to survive and thrive for that long you have to be able to continuously be willing to innovate and invest in transformational technologies and we see blockchain as holding that potential," he explained. "Billions of dollars are flowing through this complex matrix of media transaction, so it’s really ripe for improvement and efficiency."

Herman said Kimberly-Clark didn’t rush to get onboard with IBM’s pilot because the team was sensitive about defining the problem appropriately. There’s no value for the brand to pursue blockchain "out of academic fascination."

"This is not a science experiment," he said, adding that the "combo platter of IBM and Mediaocean is the thing that allows us to have a consolidated, consistent view of what happened, how to trace it backwards."

Herman’s a big proponent of the technology. He dashes skepticism that blockchain for media will disenfranchise the adtech community. He believes the opposite to be true -- the business effect of successful adoption is it will speed up decision making for the brands, agencies and technology partners.

The director said: "I think you’ll look back on this early stage period and the media agencies and brands and technologists will say, ‘how did we live our lives before this technology?’. In the same way that we can’t imagine living our lives without access to Kleenex -- it’s going to be that level of a transformative experience."

But when it comes to putting a date on industry-wide adoption, he’s less confident. Herman doesn’t believe in an overnight revolution. He’s on the lookout for stages of maturity instead.

"Let’s talk about that in Q1," he added.

What is blockchain?

Blockchain has been in existence for many years. It’s is a decentralized digital ledger in which transactions are recorded chronologically and publicly. Its trust is valued because its authenticity is verified by every member of the chain, meaning no third-party engagement.

The network was created by the person -- or group of people -- known as Satoshi Nakamoto in 2009 as the platform to house Bitcoin. The majority of headlines which proceeded its creation focused on blockchain’s potential for cryptocurrencies of the future. Only recently have companies explored the technology for other means.